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Microsoft taps $4.4 billion for Web, wireless research

Chairman Bill Gates attempts to reassure the financial community that the software giant is on track with its new strategy for moving its Windows franchise more fully onto the Web.

REDMOND, Wash.--Microsoft chairman Bill Gates today attempted to reassure the financial community that the software giant is on track with its new strategy for moving its Windows franchise more fully onto the Web.

At its annual financial analysts' meeting at company headquarters here, Gates and other top-level Microsoft executives announced plans to invest $4.4 billion in research and development in high-growth markets, such as Web development, wireless and gaming, as well as in its MSN network and consumer services.

The company also announced that Web portal Lycos has selected Microsoft and chip giant Intel to provide the operating system, software and other technologies to run the company's family of popular Web sites.

In addition, Microsoft announced it would soon release the first test version of Whistler, a consumer operating system based on the company's Windows 2000 software. Whistler will be available in beta form in October, just a month after the release of Windows Me, an update of Windows 98 for the home.

Microsoft also said it plans to ship next week the first service pack, or bug fix, for its recently released Windows 2000 operating system. The service pack was sent to testers in May. In addition, Windows 2000 Datacenter, a high-end version of the operating system, will be released on August 11, the company said.

Gates in his speech once again hawked the company's vision to make available its Windows operating system and software over the Web and hinted at home networking and other new technologies to come.

The new strategy, called Microsoft.Net, was unveiled by the company last month. It is targeted at making Microsoft's existing software available over the Net to traditional PCs and devices such as cell phones, handheld computers and Web pads.

The goal is to tie all computing devices to the Net, allowing people to access their email, calendars and important files regardless of what device they're using. Microsoft, which competes against software makers such as Oracle and IBM, envisions a future when software will be offered over the Web as a service.

"The Internet plays the same role that the PC does (today). It's the Internet plus the devices, the new set-top boxes, new PCs, small-screen devices," Gates said in his speech.

"We're taking the research and development (we've done) and (getting) them onto the new devices into a new release of Windows and (driving) revenue and a new wave of subscription-type revenue from .Net, making it easier to get at software and help people get at this digital world," Gates added. "That's a phenomenal opportunity. No one else is building the platform and thinking about this the way we are."

Gates also hinted at several new technologies, including a specialized version of Windows that will run on new home appliances, called "home gateways," that allows consumers to connect electronic devices--PCs, appliances or security systems--with their phone services and high-speed Internet access.

The specialized version of Windows could compete with a consortium of technology and consumer electronics companies, including Sun Microsystems, IBM, Oracle, Sony, Philips and Cisco Systems, which is building a software model based on Sun's Java programming language to run on home gateways.

Gates also hinted that the company will release new software that will allow non-Windows devices, such as handhelds using the Palm operating system, to support the Microsoft.Net software.

"We'll work on any devices, even devices where we don't do the initial client operating system," he said. "We'll have a layer of software that runs on that machine and connects up to the .Net world."

Gates said Microsoft's new ventures, such as gaming and small business, are vital to the company's continued financial health. "Wireless and small business are very important. Those are the fast-growing businesses. Those are our new territory," he said.

Gates added that communications see related story: Microsoft's call for wirelesswill become the primary use of PCs in the future. Though "real-time communications" accounts for just 10 percent of PC usage now, it will grow to 40 to 50 percent through instant messaging, voice and video, he said.

Microsoft executives today also said the company will release its new database--SQL Server 2000--to manufacturers next week, with the software becoming available to businesses in September. Microsoft competes against Oracle, IBM, Sybase and Informix in the huge market for databases, software that stores and collects corporate information such as Web site pages.

After Gates spoke, Bub Muglia, head of the business productivity group at Microsoft, said the company?s upcoming Office.Net technology, a Web-deployable version of Office, will be targeted at small businesses and consumers. Muglia said the company will continue to offer the existing shrink-wrapped Office bundle.

Before Office.Net debuts next year, Microsoft plans to ship an updated version of the current Office bundle, which Muglia demonstrated here today. Microsoft has not disclosed a name or version number for the next release.

The new version, set to ship sometime early next year, will include integrated instant messenger software and new search capabilities for finding documents, email files, and other information.

Other new features include technology for recovering work in the event of a system crash and "smart tags," which lets user click on a word or name within a document to send email, schedule a meeting or find an address.

Muglia also demonstrated upcoming XML-based document management server software code-named Tahoe, which adds workgroup functions Microsoft?s existing software. Tahoe, which will ship early next year, will allow businesses to set up a central meeting area on the Web to collaborate and share information on projects.

Microsoft says Tahoe can be used to build a company-wide or workgroup portal for organizing documents and data to be shared. It?s based on Microsoft?s existing Digital Dashboard software. Digital Dashboard technology uses Microsoft's Outlook email software to permit companies to give its employees one piece of software that in theory serves as a window to access email, company resources and information from the Web.

Microsoft also took time to highlight its MSN Internet access service. Rick Belluzzo, head of the company?s interactive services, said MSN plans to expand the service to more fully integrate music into its interface and will focus more on providing services to wireless and handheld devices. Belluzzo also said revenue per-user at MSN grew by 70 percent last year.

Later today, Microsoft executives will outline planned future investments in areas including television, its Xbox game console, wireless technology and its bCentral Web site, which aggregates content and services geared toward small businesses.